Offset mortgages link your savings to your mortgage, your balance minus your savings determines the interest you pay. This calculator runs the offset maths properly.
Savings offset against the balance month by month.
Offset mortgages typically cost 0.3–0.7% more than a conventional fix. The break-even depends on how much cash you park.
An offset mortgage links your savings account to your mortgage. You don't earn interest on your savings. Instead, the lender only charges mortgage interest on your balance minus your savings. With a £200,000 mortgage and £30,000 offset savings, you pay interest on £170,000.
Your monthly payment is still calculated on the full mortgage balance. So even though you're paying less interest, your capital repayment is higher for the same payment, which means you clear the mortgage faster without officially "overpaying".
Overpaying a normal mortgage locks the money away. Offsetting keeps it accessible in a savings account, you just don't earn interest on it. For people with variable income, large emergency funds or changing life circumstances, that flexibility is genuinely valuable.
The catch: offset mortgage rates are typically 0.3–0.7% higher than equivalent fixes. So you need enough offset savings to justify the higher rate. A rough rule: if you hold offset savings equal to 15% or more of your mortgage balance, an offset usually beats a cheaper fix. Below that, not so much.
Our full guide to offset mortgages covers mechanics, common myths and who should (and shouldn't) consider one. MoneyHelper has a neutral overview too.